Yen tumbles on intervention warning, higher risk appetite

The yen hit a roughly two-week low against the dollar on Monday after Japan’s finance minister said Tokyo was ready to intervene in the currency market if needed, with stronger risk sentiment also easing demand for traditional safe havens such as the Japanese currency.

The yen hit an 18-month high against the dollar last week JPY=, having gained around 15 percent in the past six months in part because of waning investor expectations for a steady increase in U.S. interest rates.

That has prompted a ramping-up of intervention talk, with Finance Minister Taro Aso’s comments on Monday following remarks last week from Prime Minister Shinzo Abe, who said Japan was watching the yen’s movements and would act if necessary.

Many investors believe, however, that the bar for intervention remains high and the comments were meant to talk down the yen.

“While actual currency intervention ahead of a G7 meeting later this month remains unlikely, there is a risk of either currency intervention or BOJ (Bank of Japan) monetary policy easing in the months ahead, a risk that is, at least for now, keeping the yen’s upside limited,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. Read more